When most people think of insolvency, or being insolvent, they think of it as something that is forced upon you. Companies and businesses are forced into liquidation, or individuals are made bankrupt by one of their creditors… many people do not realise that declaring yourself insolvent can be voluntary, and  that it can also be a beneficial decision to make.
Being insolvent is defined as being unable to pay your debts as they fall due. Many people may not realise that they are actually insolvent, because they are managing to pay their debts; but they are doing so with their credit cards, “robbing Peter to pay Paul”. Basically, if you have more debt repayments than you have real money to pay them, you are insolvent.
If you are insolvent, and you are incapable of remedying the situation on your own, you have two options. You can declare Bankruptcy, which means that you will no longer make repayments towards your debts, but if you have assets with available equity or sufficient income, these will be applied to your debts by your Bankruptcy Trustee. To voluntarily declare yourself Bankrupt, you would submit what is known as a Debtor’s Petition to the Australian Financial Security Authority. You can do this directly with them and have them act as your Bankruptcy Trustee, or you can go through a private Trustee of your choosing.
Your other option is to enter into a voluntary insolvency agreement, which would be either a Debt Agreement or a Personal Insolvency Agreement. These agreements are like legally binding payment arrangements, whereby you offer a certain amount of money towards your debts and, once complied with, you are thereby released from them. They are an initiative of the Australian government designed to assist insolvent individuals to manage their debt and avoid declaring Bankruptcy.
Many people have used a voluntary insolvency agreement to ease the pressure of their financial burdens and to avoid having to declare Bankruptcy. They are not without their consequences, but they do offer relief from the pressures of over-indebtedness and a fresh financial start. If you are unable to pay your debts as they fall due, call us on 1800 462 767 and ask our experienced consultants about your voluntary insolvency agreement options.

One of the biggest concerns that people have when they are considering Bankruptcy is the effect it will have on their home, either the one that they already have, or the one that they are hoping to get; “I will never be able to get a home loan” is one of the most common things we hear over our Bankruptcy advice line. This fear, though, is a misconception.
When you declare yourself Bankrupt there are two records kept. One of them is a permanent record on the National Personal Insolvency Index, which is a government record of acts of insolvency. This index is very rarely looked at by banks though, as they have to pay a fee every time they search it – it would simply cost them too much! The other record is a default on your credit file, and that one lasts for seven years.
It is an obvious fact that whilst you are Bankrupt you will not be applying for a home loan. You are only a Bankrupt person, though, for three years, providing of course that you comply with all of the instructions of your Trustee. This means that after the three years of your Bankruptcy you will have four years left during which there will be a mark on your credit file.
Remember, though, that a default does not always stop you from getting credit. It will most certainly have an effect on the application process, but you could still be granted a home loan on the basis of other criteria, such as having a large deposit and a good income and savings history. You may find that joint mortgage applications are looked upon more favourably if one of you has a clean credit file. And another important thing to remember is the simple truth that if you are considering Bankruptcy, you are most certainly not in a position to be considering a mortgage anyway. For some people, declaring Bankruptcy gives them the fresh start they need to be able to start saving for a deposit, so when the seven year default period is up, they are actually in a better lending position than they were before the Bankruptcy.
If your financial situation is such that you are genuinely considering Bankruptcy, you should not let the fear of not being able to get a mortgage stop you. You need help now, and the longer you delay, the longer you delay the time when you will actually be in a position to apply for a mortgage. The mark on your credit file from Bankruptcy may not actually stop you from being granted a home loan, and even if it does, it is only for seven years. For more information on Bankruptcy and how it might affect your financial future, call one of our debt consultants today on 1800 462 767 and find out everything you need in order to make an informed decision.

If you are struggling to pay your credit card debts you can try to come to some sort of temporary arrangement with your creditors. This is usually known as hardship, a process by which they will assess your application for assistance and, if they deem you qualified for it, may do such things as freeze the interest on your account for a period of time, or grant you a moratorium on your repayments. These arrangements are not binding on your creditors though, and they are not permanent (the average term is around 3 months); they are known as “informal” arrangements.
If you are unable to come to such an arrangement with your banks, or if it is not going to give you as much assistance as you need, you may want to consider a “formal” arrangement. Formal arrangements to manage your debt are legally binding, mediated by a third party, and governed by the body that regulates insolvency actions in Australia, which is the Australian Financial Security Authority. There are two such arrangements, which allow you to settle your debts with your creditors at a reduced amount, and these are known as a Debt Agreement and a Personal Insolvency Agreement.
Debt Agreements and Personal Insolvency Agreements are the same sort of arrangement, although a Debt Agreement is usually the most popular, as their availability to you is dependent on how much you owe, how much you earn, and what you have in the way of assets. Essentially, the agreement is a legally binding one whereby you will pay a certain amount into it over a period of 3-5 years and, providing it is completed, this amount is accepted in full and final settlement of all of your unsecured debts. There are many advantages to choosing a formal solution such as this over an informal one, in that the interest on your debts is frozen, it is binding and permanent, and unlike individual informal arrangements that must be negotiated and agreed to by all of your creditors separately, a formal arrangement encompasses all of your unsecured debts; you just need the majority of them to accept it.
If you feel that you are in need of a formal solution to your debts such as a Debt Agreement, call one of our friendly consultants today on 1800 462 767. We can help you to establish whether or not it might be a good option for you, and give you all of the information that you need so that you can make an informed decision.